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Richard (RJ) Eskow
Published: Thursday 23 May 2013
Now that the world has seen its tax payments, maybe Apple should change its logo to a shamrock.

Apple Pie is American, But Apple Computer isn’t. Not Anymore.

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Did you know that Apple Computer has become a foreign entity? Did you know that it’s more Irish than anything else, at least as far as taxes are concerned? Or that it pays very little in income tax, even though its products wouldn’t exist if it not for U.S. taxes?

Apple products were designed in the United States by U.S.-educated individuals and entrepreneurs. (Even Steve Jobs, who famously dropped out of college, said he came up with essential elements of Apple’s product design by auditing courses at Reed College.)

The company’s logo is an apple, which may or may not have been inspired by the Beatles-owned company of the same name. But since then the image has become synonymous with two iconic qualities of this country’s Silicon Valley: creativity and entrepreneurial drive. And what’s more American than apple pie?

Now that the world has seen its tax payments, maybe Apple should change its logo to a shamrock.

(You can tell Apple to pay its fair share of taxes by signing this petition we’re co-sponsoring with Americans for Tax Fairness.)

Who put the “Mac” in “MacBook”?

Even though only 4 percent of its workforce is based in Ireland, and only a small percentage of its profits are earned in that country, Apple recorded 65 percent of its worldwide profits there. Many other “American” companies are also taking advantage of Ireland’s lax tax laws, including Google, Facebook, Pfizer, Johnson & Johnson and Citigroup.

We now know that, as The Wall Street Journal reports, “Apple used technicalities in Irish and U.S. law to pay little or no corporate taxes on $74 billion over the past four years.”  Sen. Carl Levin described Apple’s bookkeeping as the product of “alchemy” and “ghost companies,” and that’s certainly true as far as the United States is concerned.

A Senate panel concluded that Apple negotiated a deal with the Republic of Ireland whereby it would declare earnings there and pay an ultra-low rate of 2 percent.  That arrangement sits atop a corporate tax filing in which, as The New York Times reports, Apple assigns more than $100 billion in profits to overseas subsidiaries.

As the Times also reports, Apple created an entity called Apple Operations International and incorporated it in Ireland. But despite the fact that this entity is purportedly based on the Emerald Isle, it “keeps its bank accounts and records in the United States and holds board meetings in California.”

Apple Operations International gets all the benefit of being an American company, and collects the lion’s share of profits for one of the most profitable companies in the world.  And yet it pays a tax rate of only 2 percent.

Man, talk about the “Luck of the Irish”!

OSX-pats

It was a big deal when it looked as if a foreign company might take over Yahoo!  But Apple’s expatriation happened without a whisper.

Under the Foreign Agents Registration Act, a foreign “principal” is defined as “any entity organized under the laws of a foreign country or having its principal place of business in a foreign country.” And if Apple’s a foreign corporation, shouldn’t its lobbyists be forced to report their activities under the Foreign Agents Act?

As a U.S. government website explains

“The purpose of (the Act) is to insure that the U.S. Government and the people of the United States are informed of the source of information (propaganda) and the identity of persons attempting to influence U.S. public opinion, policy, and laws.”

That’s worth noting the next time President Obama calls somebody like Tim Cook – or speaks with the CEOs of other non-American companies – to discuss “deficit reduction” with them.

After all, our middle-class economic crisis isn’t Ireland’s problem.

The Evading of the Green

Deal or no deal, even the Irish Apple may be too slippery for that nation’s tax collector. Adds the Times: “Apple Operations International has not filed a tax return in Ireland, the United States or any other country over the last five years.” To invert the old Beatles song, when it comes to taxes Apple is “not here, not there, not anywhere.”

CEOs like Apple’s Tim Cook (complain that they can’t “repatriate” their earnings to the United States because our taxes are too high. And yet, remarkably, the Times reported today that much of that money is already here.

“Multinationals based in the United States,” writes the Times, “now hold more than $1.6 trillion in cash classified as ‘permanently invested overseas.’” Permanently overseas? Apple’s $100 billion in offshore profits is managed in Reno, tracked by accountants in Austin, and stored in New York banks.

That’s called having your apple and eating it, too.

unGrateful

U.S. tax dollars funded the creation of the Internet and the many of the design breakthroughs that drive Apple’s tax products. American taxpayers underwrite the agencies that protect Apple’s U.S. assets. They educated most of its workers in Reno, Austin, and New York. They’re paying for the police departments and other agencies that protect Apple’s offices and keep the people inside them safe and healthy.

Too bad Apple Inc. isn’t pulling its weight for all these expenses.  You are. Individual taxpayers paid more than $1 trillion in federal income tax in 2011, while corporations paid only $181 billion. Remember those figures the next time they tell you we can’t afford to provide the government services that have helped Americans for generations.

We’re footing the bill for their almost unimaginable success – and the imbalance is getting worse.

Lone Star State of Mind

After Apple made the politically-motivated decision to manufacture one of its product lines (only one) in the United States, it chose Texas as the location.  That tells us even more about Apple’s patriotism and loyalty, since Texas is an anti-union state (they call it “Right to Work,” when “Right to Be Underpaid” is more like it) with lax regulatory enforcement.

What’s more, at least one reliable report says there’s a decent chance that the Texas factory will be owned and operated by FoxConn.

That’s right: Apple’s Texas plant could be owned and operated by the Chinese company that was so lax in its safety procedures – with Steve Jobs’ knowledge and approval – that workers there died horribly in fires.

Will manufacturing one of its product lines in the U.S. make Apple an American company again? Hardly. Toyota manufactures nine models here: the Avalon, the Camry, the Camry Hybrid, the Corolla, the Sequoia, the Sienna, the Solara, the Tacoma and the Tundra.

That’s one down, eight to go, before Apple catches up with its inarguably Japanese counterpart.

An Apple Repair We Can Afford

Senators were eager to express their enthusiasm for Apple’s products yesterday, and why not? They’re beautifully designed. I use a couple myself. But Apple’s a for-profit entity. It’s no more generous to its customers than it is to the taxpaying public at large, without whom it couldn’t exist.

If you’ve ever tried to repair an iPhone you know exactly what I mean. The Wall Street Journal says that “Apple earns almost as much from its customers’ butterfingers as it does through corporate tax loopholes.”

Tim Cook is almost certainly telling the truth when he says that Apple complies with all appropriate tax laws. (We’re not so sure he’s right when he says that Apple complies with the “spirit” of those laws, but since that’s intangible and unquantifiable we won’t quibble.)

The law itself is the problem. That’s why we find ourselves in agreement with Sen. John McCain, who said, “We don’t have to wait and have a grand bargain. It’s a cop-out. We all know there are loopholes that are outrageous.”

Closing those loopholes is one Apple repair we can’t afford not to make.

Under Another Flag

We’re not trying to red-bait or vilify Apple or any other multinational company when we say they’re no longer American corporations. We don’t mean they’re “un-American” in the subversive, treacherous, Sen. Joe McCarthy sense. It’s just time to recognize reality: They fly under no flag but their own.

Don’t blame executives like Cook, either. Their fiduciary duty compels them to place profits over people – or patriotism. To paraphrase Jessica Rabbit: They’re not bad, their charters are just drawn that way.

We should treat Apple and other formerly American multinationals as neutral entities with whom we can cooperate at times for our mutual benefit. We should encourage them to invest in the United States and hire American workers, as we do with other non-American corporations.

What we shouldn’t do is treat them as U.S. corporations. The very concept is probably obsolete in the multinational arena.

iBorrow

In a final irony, Apple – which is hoarding $145 billion in cash – borrowed $17 billion last month. Why would a company with that much money on hand choose to go billions of dollars into debt?

One reason for the indebtedness is that it’s yet another legal way to avoid paying taxes. But here’s what really gets the Irony Meter trembling: As the New York Times Dealbook blog notes, Apple issued this debt because it was able to obtain “interest rates that hovered near the low-cost debt of the United States Treasury.”

Investors are essentially paying the United States government to borrow their money, because the U.S. Treasury is still one of the safest places to park your money on the planet. Apple’s rates, as you can see from the above, are nearly as good. When debt is this cheap, it’s fiscally irresponsible – literally – not to borrow.

And what was the President calling Tim Cook about? Ways to avoid borrowing more money. That’s how off-kilter our economic debate has become. At these rates the United States government should be smart enough to do what Apple is doing: Borrowing money to fortify its future.

Bringing Apple Back Home

Our government will have more of the money it deserves someday, too, if Apple becomes an American corporation again.

We can’t wait for Tim Cook to do that. In fact, it would be fiscally irresponsible for Cook or any other executive to voluntarily give up more of his company’s income than is legally required.  It’s up to our leaders, not corporate executives, to fix this problem.

Let’s hope that yesterday’s Senate hearing means that the process has finally begun.



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ABOUT Richard (RJ) Eskow

Richard (RJ) Eskow is a well-known blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance, and information technology.

A whine that is 30 years old.

A whine that is 30 years old. Companies have been cheating taxpayers in plain view since St. Ronnie. Why is this all of a sudden news? Crapple is just one of many companies all true blue and flag waving American corpeople that shirk their duties to their fellow citizens.

I think NAFTA came around

I think NAFTA came around sometime after St. Ronnie. You might want to check out St. Willie.

The older I get, the more I

The older I get, the more I realize that we need a form of capitalism that allows primarily for worker-owned businesses. These smaller companies would be grounded in, and have a stake in, the local economy. Jobs would likely stay put.

The other half of the solution is to put corporations in their true place - not as profit-making, money-draining behemoths, but as servants of the community. And the first step I would take toward that goal is to forbid local governments from bending over backwards with their tax-break offers. If these huge companies are not able to support themselves with the profits they now make, then they should break themselves into smaller, more manageable units, or go bankrupt. We can then build something different and far, far better for the rest of us.

It isn't just the US

It isn't just the US Education System, the US Internet, the US Law Enforcement, the US Infrastructure, the US Borrowing Rate (and WHY CAN'T I GET ANYTHING APPROACHING THAT RATE? I'M BURDENED WITH DOUBLE DIGIT INTEREST ON ANY AND ALL FUNDS BORROWED YET NEVER STIFFED ANYONE.), the US Military, the US Congressional, Executive and Judiciary Branches, etc., etc., etc. that directly and indirectly support Apple, et al. And I won't mention the entire host of consumers without whom these massive wielders of wealth would even exist.
No.
It's the US Patent Office upon which they ALL rely.
Given that single, simple fact, there is one way to force those crooks to pay their share--confiscate their patents, hold them forfeit for 10 days and if ALL the overseas monies are not returned AND all taxes returns filed and paid--in full? Those patents will be permanently and forever declared null and void.
If they wait an additional 2 days without paying all taxes on all profits plus penalties and back interest (at typical credit card rates), all their assets are seized--anywhere in the world. Period. Then they'll discover just who and how and what and why they were so successful.
Bunch of F*&^ING ingrates.

SPLF

The slogan for the U.S.

The slogan for the U.S. business policy should be: "We tax you the hell out of here, then blame you for leaving". With the second highest corporate tax rate in the world, it's no wonder companies like Apple are moving out. The solution? Repeal the 16th amendment of the Constitution, eliminate the IRS, throw out the current Communist tax system and initiate a either a Fair or Flat Tax. There are over 13 trillion dollars in off shore banks which would come home if we had either a Fair or Flat system with a 0% corporate tax rate. That 13 trillion would stimulate the economy immensely and create jobs, good jobs for Americans. Also, someone should tell Mr. Eskow that Texas can afford to be a "right to be underpaid" state; Texas doesn't tax the holy hell out of it's people. The huge migration, currently underway, from mismanaged blue state like Michigan and California, to well managed red states like Florida and Texas certainly exposes the truth.

Mr. Eskow may be correct that

Mr. Eskow may be correct that Cook and his CEO cronies aren't to "blame" for the horrific unfairness of the US Tax Code, but the fact is that, as Mr. Eskow notes, these companies wouldn't exist were it not for US taxpayer funded institutions. This makes Apple, and many other like-minded American formed corporations the ultimate moochers and takers. The most efficient means of prompting Congress to close corporation tax loopholes isn't writing your congress person. It's putting pressure on these corporations into having their lobbyists prompt the changes. That calls for boycotts. BOYCOTT APPLE NOW!!!!

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